Tariff Webinar Series: Transfer Pricing with APAC Lens on Trade and Customs

Key Themes and Insights

• Tariffs are a growing concern for APAC businesses due to recent U.S. policy changes under the new administration.
• IEEPA tariffs have been introduced targeting China, Mexico and Canada, with reciprocal tariffs affecting over 50 countries.
• Legal challenges are ongoing, creating uncertainty in the global trade environment.

Transfer Pricing vs. Tariffs

• Tariffs: Taxes on imports, based on product value, regardless of profitability
• Transfer Pricing: Pricing of intercompany transactions, including goods, services and intangibles, focused on profit allocation

APAC Business Impacts

• Businesses are adopting a “wait and see” approach but are increasingly nervous.
• Significant tariffs (e.g., 46% on Vietnam, 36% on Thailand) are threatening business models.
• Some are exploring inventory build-ups, third-party manufacturing and free trade zones.

Risky vs. Strategic Responses

• Risky: Transshipment, misreporting origin/value, double invoicing
• Strategic: Substantial transformation analysis, tariff engineering, first sale rule, unbundling intangibles

Recommendations

• Conduct comprehensive modeling of tariffs, corporate tax, VAT and withholding tax.
• Review and adjust intercompany agreements and transfer pricing models.
• Explore supply chain restructuring and M&A opportunities.
• Prepare for customs enforcement and ensure compliance with origin and valuation rules.